Business groups whose consolidated financial statements are audited will see auditors work differently starting with the 2026 financial year audit. The Indonesian Institute of Certified Public Accountants (IAPI) has issued a revised SA 600, "Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors)", effective for audits of group financial statements for periods beginning on or after 31 December 2025.
For companies with a calendar financial year, this means the audit of the financial statements for the year ending 31 December 2026, usually carried out in early 2027, will already apply the new standard. Audit planning typically starts in the fourth quarter of 2026, so now is the right time for directors, group accounting teams, and audit committees to understand the changes.
Background and Effective Date
According to IAPI's announcement, the revised SA 600 was approved by the Public Accountant Professional Standards Board on 11 July 2025 and ratified by IAPI's National Board on 16 July 2025. The standard adopts ISA 600 (Revised) issued by the International Auditing and Assurance Standards Board (IAASB), which internationally has applied to periods beginning on or after 15 December 2023. Early application is permitted.
The revision aligns group audits with other standards that were updated earlier, notably Standard on Quality Management (SPM) 1, SA 220 (Revised) on quality management for an audit of financial statements, and SA 315 (Revised) on identifying and assessing the risks of material misstatement.
What Changes in a Group Audit
The main changes can be summarised in six points.
- A risk-based approach. The group auditor no longer relies on classifying "significant components" by size. The scope of work is driven by the assessed risks of material misstatement of the group financial statements, so a small but high-risk subsidiary may receive more attention, while a large low-risk entity is not automatically subject to a full audit.
- The group auditor determines the components. A component need not be a legal entity. The auditor may treat a location, a business unit, a function, or a shared service centre as a component, reflecting how the group manages its activities and information systems.
- Responsibility and involvement of the group engagement partner. The group engagement partner remains fully responsible for the opinion on the group financial statements and must be sufficiently involved in directing, supervising, and reviewing the work of component auditors. Within the quality management framework, component auditors are treated as part of the engagement team.
- Materiality and aggregation risk. The group auditor sets component performance materiality for components where audit procedures are performed by component auditors, taking into account the risk that small misstatements across many components add up to an amount that is material to the group.
- Two-way communication and access to information. The standard emphasises clearer two-way communication between the group auditor and component auditors. It also addresses what the auditor should do when access to people, information, or component auditors is restricted, including the effect on the opinion.
- More detailed documentation. The group auditor's working papers must show the basis for determining components, the risk assessment, the direction given to component auditors, and the review of their work.
The Consolidation Process in the Spotlight
The risk-based approach puts particular focus on the consolidation process. Auditors will assess how the group collects financial information from each entity, eliminates intercompany transactions and balances, aligns accounting policies, deals with differing reporting dates, and prepares consolidation adjustments. Group-wide controls and centralised activities, such as a shared finance function or a central ERP system, also feed into the risk assessment.
For management, this means incomplete intercompany reconciliations, inconsistent accounting policies across subsidiaries, or undocumented consolidation journals will surface sooner and may lead to additional audit procedures.
Practical Impact for Group Management
SA 600 governs auditors, not management. Even so, a smooth group audit depends heavily on the company's readiness. Steps worth preparing from the planning stage:
- An up-to-date group map: ownership structure, subsidiaries, associates, joint ventures, operating locations, and changes during the year such as acquisitions, disposals, or restructurings.
- A realistic group reporting timetable, including deadlines for each entity's reporting package.
- Uniform reporting packages and group accounting instructions, so accounting policies are applied consistently across all entities.
- Intercompany reconciliations performed regularly and supported by documents, not only just before the year-end close.
- Documentation of group-level controls, including controls over information systems and shared service centres.
- Access to the management, records, and auditors of each subsidiary, including entities abroad or audited by another public accounting firm. Access barriers should be discussed early because they can affect the opinion.
Audit committees should also ask the auditor how the group audit scope is determined, which components will be handled by component auditors, and whether the new standard changes the timetable or fee estimate.
Conclusion
The revised SA 600 shifts group audits from a component-size approach to a risk-based approach, strengthens the responsibility of the group engagement partner, and requires better communication and documentation with component auditors. For calendar-year entities, the change takes effect with the audit of the 2026 financial statements. Groups that tidy up their consolidation process, intercompany reconciliations, and information access now will have a smoother audit.
Want to understand the impact on your group? See the Financial Statement Audit service, read Understanding Audit Opinions and When Must a Company Be Audited, or request an estimate on the Proposal page.
Official References
- Indonesian Institute of Certified Public Accountants (IAPI), announcement "SA 600 dan SJT 4400" (ratification of the revised SA 600 and its effective date).
- IAPI, Exposure Draft SA 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors), 2025.
- IAASB, International Standard on Auditing 600 (Revised), Special Considerations—Audits of Group Financial Statements (Including the Work of Component Auditors).
This article is general information and is not legal, audit, or tax advice for any particular situation. Application to each company must consider the relevant facts, documents, and applicable regulations. The Indonesian version is the original text.